Fleet operators are cautiously awaiting Wednesday’s Autumn Budget, concerned that the “difficult decisions” forecast by the chancellor earlier this year could impact operating costs and affect demand for electric company cars.
Rachel Reeves will deliver the new Labour government’s first Budget on 30 October, having warned during the summer that urgent tax reforms would be needed to fill the "£22 billion black hole” in the UK's public finances.
Peter Golding, managing director of Fleetcheck, said this is an opportunity to align EV policies and give a “clear signal” to fleets considering making the switch.
He highlighted HMRC's recent cut of the Advisory Electric Rate (AER), which is used to reimburse drivers for charging, despite a rise in energy prices at the start of October; and said that a significant reduction in company car tax incentives for PHEVs and EVs would be premature.
“It would be a mistake to look at the progress made in fleet car electrification to date and assume that the trend will continue at the same rate," said Golding. "Drivers who haven’t chosen an electric car so far are those who, for example, have no drive on which to install a charger and therefore no easy access to low-cost charging.
“In order to bring those drivers on board, the government needs to not just keep [company car tax] low but also ensure that AER matches electricity prices effectively and that the installation of on-street charging is properly funded.”
Tax breaks for EVs have bolstered demand for company car and salary sacrifice schemes since 2020 but have been criticised for being unfairly weighted towards richer households.
The Resolution Foundation, a think tank, has suggested that these incentives should be wound down, as 66% of company car drivers earn more than £50,000 per annum.
Financial support doesn’t necessarily need to be directed at fleets. The British Vehicle Rental and Leasing Association (BVRLA) wants to see more support for the used EV market, as faster depreciation leads to higher lease costs for businesses leasing new vehicles.
In its latest Outlook Report, the association has called for grants, scrappage schemes and VAT exemption from used EVs to ensure new leases remain affordable. However, it added that the government’s willingness to withdraw pensioners’ winter fuel payments suggested support for the car market was unlikely.
Most importantly, according to Ashley Tate, managing director of Allstar Chargepass UK, fleet managers need at least five years’ foresight of incoming tax policies.
Decision-makers have faced uncertain phase-out dates for non-hybrid cars, while company car tax bands are only set in stone until April 2028. That could be within the lease contract of a vehicle ordered today,
“We need stability and we need certainty,” said Tate. “By providing a long-term strategy, fuelled with incentives, change happens and action commences for the long term. Short term plans and policies – or reversing of these – results in stunted momentum, and this cannot be allowed to happen.”
